Gig work's growth places pressure on faster payments

Companies that rely on contract work also depend on diversifying revenue streams, a cycle that will repeatedly place fresh stress on an already complicated payroll system.

The number and percentage of gig economy jobs is increasing, according to JPMorgan Chase, which examined transactions between Chase accounts and 128 gig economy platforms. But the growth hasn’t been even and depends on the relationship between the sharing app and its contractors, which will change as the apps diversify. The bank found people who use apps to lease their assets, such as a an apartment or parking space, have seen a 69 percent increase in income over the past four years, while people in “driving” gig jobs saw their monthly wages decrease 53 percent over the same period.

Both of those trends coincide with core gig apps adding new services, with more varied workflows, hours and expenses.

Uber, for example, is testing an on-demand staffing service called Uber Works. Uber Works allows businesses to hire short-term work for corporate events or special functions, with work including security, waiters or support staff. Uber, which did not return a request for comment, is implementing a “new modalities” initiative that could diversify Uber’s revenue, and sources of income for Uber drivers; both are priorities ahead of Uber’s expected IPO in 2019, according to The Verge.

The different layers of income create new gig economy payment challenges for an industry that is already scrambling to accommodate payouts that don’t fit a predictable biweekly, or even a traditional freelance contract structure.

Real-time processing, or faster payments, is one option to handle variable payment cycles. It's to be a factor as the “side hustle” aspect of gig work starts to develop a second wave.

Gig economy companies are in the early stages of adopting real-time payments. Companies like Uber and Lyft offer real time push-to-debit payments for their drivers, and use this as a way to attract manpower in a highly competitive environment for drivers, said Talie Baker, a senior analyst at Aite Group.

“I believe faster payments will become table stakes for businesses that make disbursements to consumers in the next 5 years, and early adopters have an opportunity now to capture a more loyal customer following over those companies not currently offering faster payments,” Baker said.

The additions to ride or home sharing, such as on-demand waiter or maintenance staff, or food delivery, cause some expense, creating a supply chain challenge—in addition to the salary payouts, according to Peggy O'Leary, director of sales and client services for the prepaid unit at CPI Card Group.

As food delivery and now on-demand staffing add to ride sharing, Uber, TaskRabbit, GrubHub and similar companies will face pressure to move funds to more recipients at a faster pace.

“That’s especially true for any service that involves product delivery or errands — part of the pressure will be to fund the expense needed to purchase goods without having to float money,” O’Leary said. “Companies will need a structure similar to a fleet cards.”

The primary responsibility for funding supply chains for gig economy services may not necessarily be on the drivers. But even in where the drivers aren't responsible for expenses, there still may be third parties involved in processing, which a payroll processing system would need to take into account.

For example, Uber and Lyft both recently deployed health care services that allow providers to order rides for patients.

In Lyft's case, the app is collaborating with Allscripts, an electronic health record company, to integrate Lyft's platform into a network of about 240,000 hospitals, physicians and practices. In most cases, the health care provider covers the cost of the ride. This creates a parallel payment structure in which the ride sharing app is compensated, then the driver, with a need for that to happen in near real-time, according to O'Leary. "These requests for funding have to be managed in a completely new way," O'Leary said. Lyft did not return a request for comment.